ImmunoGen, Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

| About: ImmunoGen, Inc. (IMGN)
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ImmunoGen, Inc. (NASDAQ:IMGN) F4Q10 (Qtr End 06/30/10) Earnings Call August 4, 2010 4:30 PM ET


Carol Hausner - IR and Corporate Communications

Dan Junius - President and CEO

Greg Perry - SVP and CFO


Shiv Kapoor - Morgan Joseph

Pamela Bassett - Cantor Fitzgerald

Adnan Butt - RBC Capital Markets

Bret Holley - Oppenheimer

David Miller - Biotech Stock Research


Good day, and welcome everyone to this ImmunoGen's fourth quarter fiscal year 2010 financial results conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Executive Director, Investor Relations and Corporate Communications, Ms. Carol Hausner. Please go ahead ma'am.

Carol Hausner

Thank you. At 4 o'clock this afternoon, we issued a press release that summarizes our financial results for the quarter end, our fiscal year ended June 30, 2010. I hope you've all had a chance to review it, if not; it's available on our website. During today's call we will make forward-looking statements. Our actual results may differ materially from the projections made. Descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings, which can also be accessed through our website.

In our call today, our Chief Executive Officer, Dan Junius, will provide an update on ImmunoGen, and our Chief Financial Officer, Greg Perry, will discuss our financial results and guidance. We will then open the call to questions. Dan?

Dan Junius

Thanks Carol and good afternoon everyone. Thank you for joining us. There certainly have been a lot of progress since our last quarterly call in April. The headline item would have to be that our BLA was submitted for T-DM1 in July, and this makes that the first TAP compound to go before the FDA or for that matter from a pay regulatory authority for potential marketing approval. So, it's certainly a big invention in the life of ImmunoGen. The results have a lot of clinical progress. We saw the first clinical data reported for IMGN388 compound at ASCO in June. The first clinical data we reported for a TAP compound used in combination that would be for the T-DM1 plus pertuzumab compound or combination also reported at ASCO.

Patient enrolment got underway in July for the second T-DM1 Phase III trial that named MARIANNE assessing it for 1st-line use. And meaningful new clinical data were obtained from the rate of TAP compounds enabling presentations to be scheduled or expected at each of the major upcoming conferences that would be ESMO, EORTC, ASH and SABCS.

At the same time the number of clinical stage compounds in that ImmunoGen is involved and continue to increase, that number was at six at the time of our last call, clinical testing with SAR650984 started in June and we expect patient dosing with SAR566658 to start shortly, that would bring the total to eight. We expect up to four more compounds to end the clinic in 2011, two to three would be through our partnerships and one being our wholly-owned ImmunoGen compound.

That wholly-owned ImmunoGen compound would begin the flow of what we expect to be a sustained stream of proprietary compound entering the clinic from our R&D program. Finally in the quarter, we conducted a successful financing raising $77.5 million from new and existing shareholders in a tough market environment.

Today I'm sure all of us will remember May 6 when the market drops a 1,000 points, nonetheless we had a full book, we actually upsize the deal slightly we issue with exercise and I think that it was had a very fair price and has accomplished some very important element, first it gave us the funding to allow us to be aggressive in the advancement of our own compounds and our pipeline and also gave us the flexibility to be firm in our business development negotiations which we think, which was a very important element that we are hoping to address through the financing.

Let me go through the product pipeline or our service T-DM1. As I noticed our marketing application was submitted in early July by Roche, it applied for accelerated approval, that would mean a decision to be forthcoming within six months which will take us to early 2011, very early 2011. This is for patients with advanced HER2+ breast cancer previously treated with multiple HER2 targeted medicine and chemotherapy, in other words third line and later use. It was submitted as a DLA, DLA for its longer protection than NDA filings under the new healthcare reform bill in some of those protections and supplemented what's afforded by a patented state.

Roche continued to make solid progress and development of T-DM1 for second line use, over a 185 clinical sites across 20 countries now really participating the Phase-III trial for this indication. Roche has noted that a successful this trial to use to support regulatory filing of T-DM1 in 2012, the second line use in the US and Europe. This then would make that the expected approval pathway for T-DM1 in Europe since the third line study will not be eligible for filing in Europe.

Patient dosing started in the Phase III trial MARIANNE in early July which assesses T-DM1 our first line use head to head with Herceptin used for the Taxane. This is also intended to support regulatory filings in the US and Europe.

Prior to starting this Phase III trial, Roche conducted a randomized phase-II trial assessing T-DM1 for first line use again head to head with Herceptin use with the Taxane, specifically Taxotere.

The findings from this Phase II study will be recorded at ESMO in October. Roche has noted that we'll see more data with the T-DM1 plus pertuzumab trial at SABCS in December hopefully this will include data from the patients who receive this combination first line and these data weren't reported at ASCO.

As also the potential that something more will be said about their plans for hedgement this year although this is something that we don't have any particular insight into. We would just hope that they provide some clarity there.

We're extremely pleased with the progress Genentech and Roche are making with T-DM1. As you know, we took the idea of T-DM1 to Genentech back in the late '90s when they were just focused on getting her set and approved. We work with them extensively to assess alternative designs including the one with our SMCC non-cleavable linker that they ultimately took forward.

We continue to expand our portfolio of linkers and cell killing agents. We work on that to expand the range of cancers that can be effectively treated with the TAP compound, extending the opportunity into cancers with multi-drug resistance for example for those that are less sensitive to tubilin acting agents. This also enhances our capabilities to advance our own product programs.

Let me first turn where our product programs to IMGN901 which is our most advanced and which is also known as lorvotuzumab mertansine. This is in development by us for the treatment at CD56 positive cancers. This is a diverse group of cancers that includes both prevalent cancers such as small-cell lung cancer, ovarian cancer, multiple myeloma as well as rare cancers such Merkel cell carcinoma and [lymphoma].

Our IMGN901 development program is designed to provide meaningful data on the safety and efficacy of our IMGN901 when used as a single agent to, for difficult to treat CD56 positive cancers. It's also designed to provide meaningful data on the safety and efficacy of the compound when used as part of a combination regiment since cancer is typically treated with combination therapy. It also supports faster patient approaches such as development for rare cancers and other cancers with no approved or effective treatments today.

In the area of CD56 positive cancers, there are four that we are particularly interested in today. First would be small-cell lung cancer. First of all it's a prevalent cancer that almost universally expresses CD56 and has a high mortality rate with limited treatment options today. Merkel cell shares a number of commonality with small-cell lung cancer including the high mortality rate and has no approved therapies today.

Ovarian cancer is of interest because it's a prevalent cancer which has a big need for better treatment options. Our preclinical data in this cancer looked especially exciting.

And finally multiple myeloma because even though this field is getting crowded there is a real need for agents that work by other mechanisms of action. Our aggressive development program for IMGN901 is focused on gaining meaningful clinical data in these cancers.

Let me first go through what we are doing in small-cell lung cancer. We now are on the expansion phase of our oral key study allowing us to gain additional information on IMGN901 used as a single agent. We report updated findings from the study at ESMO in October.

Assessment of IMGN901 as monotherapy has to be done in patients whose cancer has relapsed after prior treatment, a notoriously difficult to treat patient population that we have seen nonetheless benefit from IMGN901 within a heterogeneous patient population across two separate studies.

Now that we're in the expansion phase for oral two which gives us the opportunity to look at this patient population hitting more homogeneous patient population in a narrower protocol that will give us a better picture of the activity and tolerability of 901 in those patient population.

In light of the tolerability of 901, we are also preparing a initiative study that is sensitive as a first-line treatment using combination with standard of care for small-cell lung cancer and we expect to have this study up and running by the end of this year.

Finally we've applied for Orphan drug status in small-cell lung cancer both the US and EU and the responses are pending.

For Merkel cell carcinoma, we are also gaining additional information on IMGN901 in this indication in the expansion phase of our 002 study.

Updated findings in Merkel cell will be included in the presentation at ESMO. We intend to make a go, no-go decision at the end of this year on the initiation of a pivotal trial assessing IMGN901 for Merkel cell. That decision will be informed by our experience with IMGN901 for Merkel cell in our 002 study and by our overall clinical experience with the compound. There is, as noted earlier a faster pace in regulatory opportunity in Merkel cell, and in this particular case we have already received Orphan drug status in both the US and the EU.

For multiple myeloma we continue to make progress in our studies, assessing IMGN901 both as monotherapy and as part of a combination regiment. We intend to present findings on one or both of the trials that are underway here at ASH in December.

And finally in ovarian cancer, we are continuing to work to bring on centers that will provide ovarian cancer patients with access to our study. For SAR3419, this is a TAP compound that binds the CD19 and targets patients with non-Hodgkin's lymphoma. It was developed by us and licensed it to sanofi-aventis, in a broader collaboration. Here sanofi has made the decision to advance SAR3419 to Phase II based on their present finding in Phase I to date, particularly in the weekly dosing study that's underway.

We are planning an aggressive Phase II program and the one who initiates that with the best possible dosing schedule to expertise the advancement to registration trials. They plan to do some additional Phase I work to further refine the dosing schedule, which has shifted the timing of the start of this Phase II study. We expect to be in the position to start Phase II about a year from now. They will then report for Phase I data that shaped their Phase II program at ASH in 2011.

IMGN388 is developed by for the treatment of solid tumors. The first reported clinical data was in ASCO this past year and it shows increasing evidence of activity at higher doses. Dose escalation has now completed with one every three week schedule. Updated results have been accepted for presentation at EORTC and will include information on the maximum tolerated dose.

We are currently gaining additional experience dosing at the maximum tolerated dose and at the same time, we are looking at the potential with a more frequent dosing regimen.

We have three other compounds in clinical testing through our collaborations, two are TAP compounds, one with Biogen BIIB015 and the other with Biotest BT-062, a clinical data that we reported on one or both of those later this year. The recent addition is SAR650984 which started clinical testing in June. This is a naked antibody, the only naked antibody in the portfolio that's in the clinic at this point targeting CD38 which is expressed on a number of hematological malignancies.

Our collaboration with Sanofi includes naked antibodies as well at TAP compounds and was driven by their interest in assessing our antibody experience. We expect a third compound from our collaboration with sanofi, SAR566658 to begin clinical testing very shortly.

There are additional compound approaching the clinics. For many years we recall that our research team was tied up developing the pipeline for sanofi-aventis. Out of this work SAR3419, SAR650984 and 566658 came out of all of this work. When the research portion of that collaboration ended, our scientist could return to developing novel anticancer agents for our home portfolio and they have been aggressively building and advancing our product pipeline, our pre clinical product pipeline.

We are now at a stage where we expect to have a regular flow of our compounds into the clinic. We expect to submit an IND for our next wholly owned compound in 2011 and for the one behind that in 2012. The first of these which was designated IMGN529 is a TAP compound for certain hematological cancers. Beyond these, we expect two or three more compounds enter the clinic in 2011 through our existing collaborations with other companies.

Finally, let me comment on business development who were delighted with the success of our technology and our support has enabled our partners to achieve to date. Roche obviously sees T-DM1 as a very large opportunity. They've mentioned peak sales here at being between 2 and 5 billion Swiss franks. SAR3419 chartered the Rituxan market potentially a very big opportunity for sanofi.

The other four compounds I've noted in the end disclose pre-clinical compounds in development by our partners are at earlier stages. So they're targeted dimension in terms of scale but again, could be very large. So we intend to enter into collaborations with other companies as well, but there are some constraints there. We're committed to doing only a limited number of additional deals as we don't want deals activity or supported partners interfere with expanding our own product pipeline.

And at the same time, we are insisting in terms that reflect the progress and best of our technology which we think is significant and taking that stance does have the tendency to expand the negotiation process considerably. All that said, we think that there are discussions underway on a number of fronts here, very constructive. We would like to think that they will lead to a constructive conclusion but unfortunately they are very difficult to come up with a firm timetable or dimension but we are pleased with the progress that we're making on that front.

So with those comments, let me turn it over to Greg to go through the financials.

Greg Perry

Thank you Dan. Our net loss for our fiscal year ended June 30th 2010 was $50.9 million or $0.87 a share compared to our net loss of $31.9 million or $0.63 a share for our 2009 fiscal year. This difference in net loss is principally due to lower revenues in fiscal year 2010 compared with fiscal year 2009.

Our revenue in our 2010 fiscal year was $13.9 million compared with $28 million in our 2009 fiscal year. 2009 revenue included a number of milestone payments two of which totaled $10.5 million that we earned with our partner's progress.

Our partners continue to make excellent progress this past year, but the timing of milestone triggering events yielded just $2.5 million. We expect higher upfront milestone payments in our 2011 fiscal year which is reflected in our guidance.

One key contributor in fiscal year 2011 is the anticipated approval of T-DM1 which would triggered in milestone payment to us as previously disclosed. We were also expecting to record our first royalty revenues associated with T-DM1. We expect them to be quite modest this first year given the potential approval timing.

Our expenses in our 2010 fiscal year were $65.2 million compared with $59.8 million in our 2009 fiscal year. This increase in expenses was principally due to our having greater R&D expenses in our 2010 fiscal year as we increase investment in our proprietary product pipeline. We finished this year with $110.3 million in cash and marketable securities.

This includes the $77.6 million we've raised from the sale of just over 10 million shares or $8 per share to new and existing holders in our public offering in May. An offering we were able to upsize due to the strong interest in ImmunoGen despite the difficult market conditions on that day.

Looking forward, our guidance for our 2011 fiscal year is that, we expect our net loss will be between $50 million and $53 million. Our cash used in operations will be between $34 million and $37 million our capital expenditures between $2 million and $3 million and we expect to end our fiscal year on June 30, 2011 with cash and marketable securities between $74 million and $77 million. This guidance reflects that we believe our cash used in operations peaked in our 2010 fiscal year; we will now start to trend lower as cash received from our partners trends higher.

Initially, most of this cash inflow will continue to be from upfront in milestone payments where we expect to see the first modest contributions from T-DM1 royalties late in our fiscal year 2011. Longer term, we expect the higher cash in-flows to more than offset any increase investment in our proprietary pipeline.

As Dan mentioned, we continue to see a high level of interest on the business development front consistent with past practice we have included just a modest contribution from anticipated DD activity in our 2011 guidance.

With our recent financing and our commitment to developing proprietary pipeline, we remained firm regarding business development opportunities we are only interested in doing a deal that makes sense for ImmunoGen and reflects fair value for our technology and number of leading pharmaceutical companies have increased investment in the antibody field in past few years and that certainly knows the difference that technology can make to an antibody.

It's particularly helpful that the leading ADC which is in front of the FDA is a compound that uses ImmunoGen's linker and cell-killing agent. It also helps in T-DM1 is being developed as a replacement for $5 billion drug, Herceptin.

Now I would like to turn it back to Dan.

Dan Junius

Thanks Greg, let me ramp up ahead with the questions just taking you through summary of what we see taking place over the next six months that there will important events. And I will start with what should be taking place in the regulatory fund with T-DM1.

As I noted that was quite in front of the FDA on July 6, so by statute that we suggested the decision would be coming out of the FDA prior to January 6, 2011. Sometime before that, there should be an ODAC panel this being a new molecular entity that would again require an ODAC and we don't know the timing that would be probably sometime this fall.

I referenced a lot of clinical data coming forward at ESMO, we should see T-DM1 data out there Phase-II 1st-line study that would be the study that would be comparing T-DM1 head-to-head with Herceptin plus Taxotere, we also would have solid tumor data on IMGN901 looking at both Merkel cell and small-cell. We should have clinical data at EORTC on IMGN388 at ASH we would be looking for clinical data on both our single agent and combination study with IMGN901 in multiple myeloma.

And then we would look to see further T-DM1 data at San Antonio breast cancer symposium towards the very end of the year.

There should be two new studies that it could be starting and that would include the new sanofi compound that I referenced that is a waiting dosing with first patient. You also heard me indicate that we would be starting our small-cell lung cancer combination study sometime prior to think end of this year. So, we are gearing up for that.

And finally again staying on the clinical front, we should have enough information to make a decision about whether we are going to move forward with a pivotal study for Merkel cell sometime within the next six months.

Business development to reiterate, difficult to gauge timing but I think if we open the window the six months I think it would be hopeful that we could see a deal come to conclusion, certainly within that period of time.

There is also the potential for updates on a couple of other fronts with T-DM1 to the extent Roche to decide they wanted to disclose interim data on the second line phase III trial or face a cumbersome conclusion and want to make public their plans on the [adjuvant] debt and if so, the possibility as well as the opportunity for clinical data to be presented on two other compounds where their partners the Biogen Idec compound or the compound with Biotest.

So a lot of information, a lot of opportunity for information to shed light on what's going on and some very important compounds over the next six months and we're excited with everything that's going on.

So with that, let me turn it back to Carol and she can help us with the Q&A.

Carol Hausner

We're about to open the call to questions. I'd like to ask our analyst to limit their questions to one/two questions per person until everyone's had a chance to ask questions and then, you can comeback in the queue. Operator, we're now ready to open the call to questions.

Question-and-Answer Session


Thank you. (Operator Instructions) And we'll go first to Shiv Kapoor with Morgan Joseph.

Shiv Kapoor - Morgan Joseph

Question. A couple of questions to start with. One on IMGN901, can you go over little bit of the clinical design for the Phase III that you are planning for later this year in Small-cell lung cancer? Specifically, what leads the limited or extended phase disease patients?

Dan Junius

You should Phase III. That's actually a Phase I, II study in small. And so what that will mean, these are the first-line patients. We'll go through dose escalation. There will be two arms to the study, all patients will get etoposide and cisplatin and one arm will also get IMGN901. And as we dose escalate in the arm that gets 901, we will determine what MTD is and then dose and expansion cohort.

I don't have the numbers off hand. I want to see the expansion cohort would be something in the 40 to 60 patient range, that would be the Phase II portion. But we think it's important here to be looking at first-line patients and some of that comes out of our experience in the 002 study while we saw activity. Unfortunately, patients after they relapsed from first-line study, it's difficult in some cases find patients and the physical status is difficult. So based on our own view as well as consultation with a number of experts in the field, the assessment was to look at first-line patients.

One other dimension that we may look at as we go into the study, I am not sure if it's part of the initial protocol is whether we want to in the 901 arm to look at potentially after patients finish their regiment that would include all three therapies to keep them on 901 as potential maintenance therapy. I don't know that we finalized that element of protocol.

Shiv Kapoor - Morgan Joseph

On IMGN529, can you talk about the target of the antibody and perhaps the linker technology?

Dan Junius

Not just yet, Shiv. That's something we'll be very happy to talk about when we were a little bit further along but we are not ready to discuss that just yet.


We'll go to our next question from Pamela Bassett with Cantor Fitzgerald.

Pamela Bassett - Cantor Fitzgerald

Thanks for taking my question. Congratulations, great development. Staying with final one for a minute, will you talk about how you're, let me pick up the pieces, will you talk about how the go, no-go decision for Merkel cell will impact the overall program development for 901 if at all?

Dan Junius

Well, that wasn't what I intended to convey. I think it maybe goes the other way a little bit. I think that there is kind of two avenues that we want to look at for input in that decision. The first is it certainly in what we are seeing in Merkel cell data itself, are we continuing to get the level of activity we have seen in those first six patients to encourage us to move for pivotal study. But there is a background item that we are going want to understand as well and that's we want to have the sense of are we on track with some of these other indications because it just makes it a little bit of a steeper climb to pursue. Merkel cell has the sole indication for 901.

If the other data and we are enrolling pretty rapidly in some of the studies, it doesn't provide updates for malformation or conformation in other areas. It may simply cause us to say we're not ready with Merkel cell, we're going to differ, but hopefully we will see data in one or more of the other indications that provide this encouragement to say, this is a broad opportunity as one that's going to limited Merkel cell.

Pamela Bassett - Cantor Fitzgerald

So specifically small-cell?

Dan Junius

Not exclusively but we would see data coming out of multiple myeloma, because that would offer some breadth of opportunity as well. We could see it coming out of ovarian. We made reference to ovarian in the earlier comments that while we haven't yet had success in enrolling ovarian patients, we are taking some steps to approach new centers specifically with the potential of bringing in ovarian patients because it seems like sort of the institutional structure that exist doesn't allow for those patients who tend to be treated in maybe a woman health area within a center as opposed to in the drug or oncology or clinical trial area and so we've had trouble of tracking of those. So, we are shifting our strategy because our preclinical data says that that's a particularly sensitive tumor to a tubulin ages, so it's very important for us to continue to pursue that. So, I would just limit to small-cell, it can be any other one of the major indications.

Pamela Bassett - Cantor Fitzgerald

And finally, will you give us some more detail around your partnering strategy? Have you developed specific criteria? Give us an idea of what deal might look like in terms of upfront milestones, royalties and royalty level? Are we talking double-digit royalty where you might retain significant ownership of some of the pipeline compounds?

Dan Junius

I can't shed too much light on that. I think the reference point I would make for you is the last single target, the other we had it into which was with Bayer back in late 2008, which had a $4 million upfront, a $170 million in milestones and royalties had got into the upper single digits. I think the one comparative word I would provide you is more and a larger upfront, larger, more in terms of milestones and potentially a healthier royalty structure. I think we may see single target licenses. I think that there's interest in multi-target deals and so, we just have to see which is the path that takes us forward.

And when you compare, I think the justification for being more aggressive is that there's been an awful lot of data that's come forward since we negotiated that deal in late 2008. This in no longer an emerging technology, this is a validated technology. I think the T-DM1 data is irrefutable. I think the data that we've generated with 901 demonstrates that there is certainly an activity level and plus we have significant innovations that we've worked on and particularly in linkers as well a more refined knowledge base around approaches to take that I think should be reflected in the economics of any new deal.

So, I think we have to wait until something comes to maturity to get into a greater specific but hopefully that gives us a little bit better flavor.

Pamela Bassett - Cantor Fitzgerald

It does and are we talking about ImmunoGen's proprietary pipeline here or targets that a potential partner may bring to you or both?

Greg Perry

This is, that's in the closed comments which we relate to technology transaction. So it would be targets and probably antibodies that are going to pay a third party would be bringing to us. If it was a transaction involving something that we had developed, a product if you will whether pre-clinical or something currently in the clinic, that dynamic would be entirely different and so no buyer is no longer a reference point for something like that we are in entirely different arena.


And we have no further questions in queue at this time. I'd like to turn the conference back over to Ms. Hausner for any closing remarks.

Carol Hausner

Okay I am sorry we now have additional questions. Operator, can you take the additional questions/


Absolutely, and we'll go first to Adnan Butt with RBC Capital Markets. Adnan your line is open.

Adnan Butt - RBC Capital Markets

Thanks it's Adnan for Jason Kantor. Just a couple of questions, number one, can you provide perhaps some more color on what kind of data you might be presenting at as both from the Phase I study for in patient with small-cell lung cancer, Merkel etcetera. And number two, can you update also on how enrollment is progressing in rich patient populations. And then finally in terms of the financial guidance, could you just clarify what if any milestones you are expecting in terms of the year end cash position for fiscal 2011, thanks.

Greg Perry

So maybe just to jump in, this is Greg. On the financial guidance, just to add a bit of color to the guidance, I think one of the things that dynamics that is taking place in fiscal year 2011 is that although as you can see from the guidance and what we finished in 2010 the net loss is approximately in the same time zone. We do expect to see an increase in revenue as well as increase in expense and we anticipate the revenues to more approximate 2009 revenue levels and 2009 for references about $28 million of revenue.

So inside of that $28 million of revenue we would anticipate for instance a milestone associated with T-DM1 approval which we have discussed previously and on previous calls and we have kind of sized that at about low double digits millions. And I believe the type of Phase III milestones about 6.5 is a reference one. So that's the largest single milestone that we'd anticipate recording with their, certainly are others as well.

Dan Junius

And I think the other two questions were around the 901 data to be presented in ESMO and about enrollment in general. 901 we are in the expansion phase that would be out of the solid tumor study, the oral 2 study. And I think what you will see is, because we're had MTD, that provides some opportunity to enroll at a faster pace and do not having to wait after each dose escalation.

So what you'll see is an expanded patient population and the specifics from an abstract, maybe the abstract has been prepared but some other posture as in of how that gets presented inside. I don't think we're at that stage yet. We probably will make an effort to try to segment the sub populations between Merkel cell and small cell within that data

And your question on enrollment, enrollment again you get a benefit in the 388 and in and actually our other patient two of our other three studies. The 002 which is the solid tumor study for 901 and 003 which is monotherapy and multiple myeloma. All three of those are at MTD, so you are at the expansion phase which just gives you the opportunity to continue to enroll without the gaps of waiting for patients to mature to a degree at each escalated dose. At the same time we continue to add studies, we would run into some hurdles with IRBs of getting some of these sites up and running and we seem to be passed most of those and all of that is contributing to expand in enrollments.

Smaller group but our combination study and in multiple myeloma also seems to be enrolling at a premium clip. Now here we are in dose escalation but maybe I think its wrong in a good clip based on the contrast of how long it took us to get through some of the bureaucratic processes at the IRBs.

But now that we are pass that at number of sites, we seem to be enrolling each success and dose cohort pretty rapidly.

So, these things can shift a little bit but it's a moment in what we are seeing some improving trends in condition enrolment. Our enrolment last year fiscal '10 was up. I wanted to say it was 60% or 70% up from the prior year and we are looking for our enrolment to be up another 50% plus this year. So, we are pretty ambitious with what our expectations are in enrolment. But I think we have the right centers in place and in programs to hit those objectives.


We'll go next to Bret Holley with Oppenheimer.

Bret Holley - Oppenheimer

Hello this is Jay calling in for Bret. I had a quick question on 388 which actually leads me into a more general question. Which is, is the alpha V antibody, is that therapeutic under itself or its just a targeting agent and then sort of more generally, is there a trend towards antibodies that have naked antibodies that have activity on their own being better or worse, being linked to the DMs.

Dan Junius

I don't know that there is data house and they would provide us the answer of that session. So since, we were looking at it has a conjugate, our focus is on that therapeutic agents. So I don't have data that would tell you whether it would say whether that's an active agent on its own. You may have seen the poster at ESCO, whether you heard in my comments that we have seen what appears to be those related activity and what we're seeing some activity as we get them to higher doses but it's still early stage. Maybe, we'll have better insight on that by the time we get to the EORTC.

I missed your second question.

Bret Holley - Oppenheimer

Just in general. You seem to have more success or is there any correlation between the naked antibody having activity and the conjugate having more or less?

Dan Junius

I have to say that may be a little bit of an open question as well. The fact that and I don't know if you're too source, if you're thinking in terms of T-DM1 in the studies that have been disclosed thus far, is that, given that there's a lot known about trastuzumab it is that indicative or and that be extrapolated broadly. I think the comment I would make if that's part of where the question is coming from, I would remind you that in the patient population that we've see thus far with T-DM1 on these patients has progressed while on herceptin.

And so therefore, if it wasn't active at one time, it is now found below a therapeutic level. And I'd also point out that trastuzumab as an antibody itself is not a terribly active agent. It's shown to be very effective in combination with chemotherapy but on its own I don't think anyone would view that to be a significantly active agent.


And we'll take our next question from David Miller with Biotech Stock Research.

David Miller - Biotech Stock Research

Hi, thanks for taking my questions. Most of mine have been asked so I just have kind of a follow-up question. I just wanted to make sure that I heard correctly, the Phase I-II first-line small-cell lung cancer trial for 901, this is a randomized trial design?

Dan Junius

It is.

David Miller - Biotech Stock Research

Okay. And then the other question I had I think is probably for you Greg is just to kind of housekeeping to understand the offsetting partner cash in your cash flow assumptions. Do I have the offsetting cash kind of list correct of milestones T-DM1 royalties as well as new BD activity?

Greg Penny

So, let me just kind of run through. Milestones are generally going to be recorded in the P&L as revenue at the time that we receive them. So it's in the P&L and then cash. And the royalties would be the same. And then the only difference that you will see between the two generally is going to be on an upfront. We would be amortizing upfront over some period of time. Generally its six years or so and of course we'll be receiving the cash immediately.

So the dynamic that you see in next year in the fiscal year 2011 is that you will see the net loss in both the same as 2010 on higher revenue offset by higher expenses and then you will see cash use in operations will be a bit lower than this year and that's driven by some of the upfront discussions.

David Miller - Biotech Stock Research

All right, but you are assuming cash in as you had unsigned business development activity, right?

Greg Penny

Right, and that has been our test practice. We generally have phenomenal amount of BD activity in there.

Dan Junius

Just a point of caution on that one, David. Since you are trying to sort of reconcile between net loss and cash used in operations, I think that the gap there represents what's coming in, in partnered deals that isn't recognized in revenues. Appreciate that we tend to have a reasonably large non-cash element that sort of get those between those two numbers.

I don't recall it specifically for the upcoming year but its probably north of $10 million when you take at non-cash charges like depreciation and also had in-stock compensation expense. So yes, just a caution don't head down the path that difference is going to be all partner non-recognized revenue that's in our forecast.

David Miller - Biotech Stock Research

Understood. One of the nice things about being an independent firm is we don't have to do EPS so I was just looking for making sure I understood what was in your cash assumptions for the next year. But I appreciate your clarification.

Dan Junius

Sure. Let me come back to James' earlier question because there is another aspect that maybe I should have thought about that time. If you look at for example our 901 compound, that is not an active antibody on its own. So clearly as we are seeing activity in various cancers. It is clearly coming from a conjugation since you don't get anything out of the antibody. And should we do see quite frankly that the broad opportunity here to address cancers that don't [head] here to utilize antibodies, that don't have activity on its own. So, we don't view an active antibody as being essential for a successful conjugant and we think we have examples of that and there we think our technology can simply make use of the targeting capability of the antibody to deliver effective therapy.


And we'll go to our next question from Shiv Kapoor with Morgan Joseph.

Shiv Kapoor - Morgan Joseph

Thanks for taking my follow-up. I wanted to ask you, if you were surprised by the FDA's action, they basically accepted the T-DM1 as a BLA not NDA and an additional question related to that, are you making any changes in your research platform to enable your technology now that it seems like most of the compounds will go through a BLA can be used eventually for life cycle management of antibodies.

Greg Perry

I guess in the later question, I would say no, Shiv. We're. I think that frankly Herceptin to some extent or Trastuzumab, it is for marketed agents today is probably the exception rather than the rule. Maybe Rituxan could fall into that but some of the antibodies that are out there just aren't conducive to using in a conjugant.

But BLA versus NDA were we surprised, yes a little bit because we have heard, we had understood from a number of different sources, that this was going to end up down the NDA path, we know that that wasn't the preferred approach that Genentech looking for and apparently was able to quit compelling arguments in front of the agency to say that this should be submitted as BLA.

Now, the open question is does that establish a precedent for all subsequent conjugates and I think that's open right now. We don't understand what the criteria were that convinced the FDA that T-DM1 should be accepted as a BLA versus an NDA if something that we're working to understand better. But in to your fundamental question were we surprised? Yes, somewhat but actually quite pleased that that's inevitable.

Carol Hausner

That ends our Q&A for real this time. We appreciate your interest and I invite you to call me at 781-895-0600 with any additional questions. I will just mention we are at the BMO conference tomorrow. So you can listen to the live web cast of that conference tomorrow. We're actually heading to the airport now and have a good night. Take care.


This concludes today's conference. Thank you for your participation.

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